Market 2018-04-02 (AMZN, INTC, TSLA, and more)

Market has another selloff today. It was initially led by Tech, which spills over to the whole market.

UNH +1.4%, MCD +0.9% are the only two green in Dow 30. INTC -6.1% is the worst.

Treasury: 30-year +0.17%. 10-yr +0.13%. 5-yr +0.11%. TLT flat.

Crude -2.79% to $63.13. Gold +1.45% to $1,346.50. UUP -0.1%.

U.S. WTI crude oil futures sank in their steepest one-day drop since early February due to 1) a rise in Russian production, 2) expectations that Saudi Arabia will cut prices of the crude it sends to Asia, 3) the deepening trade spat between China and the U.S.

Other news

China starts to charge tariffs on 128 US products, mainly on fruits and pork, in response to Steel/Alum tariffs from US.

Japanese business sentiment worsened for the first time in two years as rising raw materials and labor costs weigh on an otherwise steady economic recovery. A strong yen and simmering fears of a trade war, triggered by Donald Trump's move to impose tariffs on Chinese goods, could further undermine corporate morale if threats of retaliation escalate, analysts say.

Walmart (WMT -3.8%)/Humana (HUM +4.4%): Wolfe on the Walmart upside: "Our analysis suggests the best course of action for Walmart may be to pursue a buyout of Humana as the transaction looks to be both strategically sound and accretive... By extending the company’s reach more broadly into healthcare services, we believe Walmart can do good by the communities it serves and simultaneously do good by shareholders. While the transaction appears accretive given Walmart’s strong financial condition, we see the opportunity over time for significant revenue synergies."

Alphabet’s (GOOG -2.5%) Waymo is nearing the end of talks with Honda (HMC -2.1%) to build a self-driving vehicle.

Winners

Health insurers: HUM +4.4%, UNH +1.5%, ANTM +0.2%.

Gold (GLD +1.2%), and gold miners (NUGT +3.6%).

Losers

Amazon (AMZN -5.2%) is attached by Trump continuously. Other FANNG: NFLX -5.1%, GOOG -2.5%, FB -2.8%, AAPL -0.7% (relatively better than other Tech). MSFT -3%, CSCO -4.4%, NVDA -4.6%, SQ -3.1%.

Tesla (TSLA -5.1%) CEO Elon Musk sent an e-mail to employees at about 3 AM to tell them that the company will pass the 2K Model 3s per week production pace "if things go as planned today". Tesla set expectations at 2.5K Model 3s produced per week by the end of Q1 (which has been revised down twice) and 5K by the end of Q2. More on TSLA in recent headlines: a massive recall (123k Model S, about half of all production) and fatal Model X crash in Mountain View (Apple employee) using its AutoPilot. I am surprised it only dropped 5% today.

INTC -6.1%. Bloomberg’s report that Apple might abandon Intel chips in future Macs (as early as 2020) is pulling down shares of other chip companies and Apple suppliers. SOXX -3.8%. Stifel reiterates its Buy rating on Intel, as Apple accounts for under 1% of Intel profits

 NVDA -4.6%. Wells Fargo maintains its Underperform rating on Nvidia but cuts the FY19 EPS forecast from $5.39 to $5.26. Analyst David Wong cites “multiple risks associated with Nvidia’s exposure to cryptocurrency mining” and “concerns over the sustainability of Nvidia’s gaming, automotive and datacenter growth.” The analyst expects falling GPU demand to impact the July 2018 quarter and “subsequent quarters.” Firm maintains a ridiculous $100 PT. Nvidia has repeatedly claimed that the company does not count on cryptocurrency mining for their growth. AI is the key factor, which trend is unstoppable.

Airlines are all down big today: ALK -6.8%, DAL -5.2%, LUV -5.1%, AAL -4.2%, UAL -3.9%.

General Electric (GE -2.7%) agrees to sell certain information technology assets in its health care business to P-E firm Veritas Capital for $1.05B. The sale of the revenue cycle, ambulatory care and workforce management software units should be good news, as the company does need liquid cash. These are not core-business to GE (aviation, power and healthcare devices).

Overstock.com (OSTK -9.4%) issues a statement on the termination of its public offering of shares. I believe they must be frustrated after receiving quite low price offers.

My Trades Today

Bought NVDA around $220.5 (sold last Thursday)

Added more LUV.

Comments

  1. UnknownApril 2, 2018 at 7:30 PM

    Man I love your daily commentary but is it me or does it increasingly look like you are catching falling knives? Sure you'd be the hero if the market bounces but...

    Just curious - how come no shorts nor options?

    ReplyDelete
    Replies
    1. UnknownApril 2, 2018 at 7:56 PM

      Thank you for supporting my blogging. Yes, I never short stocks. I occasionally buy UVXY and SQQQ for hedging, but timing is really difficult. I am also not comfortable with options, which is kind of high leverage. I am trying to keep it simple. My strategy has been mainly to diversify and "buy and hold". It is OK if the market turns to bear market, and all my positions become underwater for 5 years. Therefore, I am not too worried.

      Delete

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